Intrinsic value of KeyCorp - KEY

Previous Close

$21.59

  Intrinsic Value

$24.31

stock screener

  Rating & Target

hold

+13%

Previous close

$21.59

 
Intrinsic value

$24.31

 
Up/down potential

+13%

 
Rating

hold

Our model is not good at valuating stocks of financial companies, such as KEY.

We calculate the intrinsic value of KEY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 23.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  27.60
  25.34
  23.31
  21.48
  19.83
  18.35
  17.01
  15.81
  14.73
  13.76
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.23
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
Revenue, $m
  7,689
  9,638
  11,884
  14,436
  17,298
  20,472
  23,954
  27,741
  31,827
  36,205
  40,868
  45,810
  51,024
  56,506
  62,253
  68,263
  74,534
  81,070
  87,874
  94,950
  102,307
  109,952
  117,897
  126,153
  134,735
  143,658
  152,938
  162,595
  172,648
  183,118
Variable operating expenses, $m
  2,022
  2,535
  3,125
  3,797
  4,549
  5,384
  6,300
  7,296
  8,370
  9,522
  10,748
  12,048
  13,419
  14,861
  16,373
  17,953
  19,603
  21,322
  23,111
  24,972
  26,907
  28,917
  31,007
  33,178
  35,435
  37,782
  40,223
  42,762
  45,406
  48,160
Fixed operating expenses, $m
  2,627
  2,684
  2,743
  2,804
  2,865
  2,928
  2,993
  3,059
  3,126
  3,195
  3,265
  3,337
  3,410
  3,485
  3,562
  3,640
  3,720
  3,802
  3,886
  3,971
  4,059
  4,148
  4,239
  4,333
  4,428
  4,525
  4,625
  4,727
  4,831
  4,937
Total operating expenses, $m
  4,649
  5,219
  5,868
  6,601
  7,414
  8,312
  9,293
  10,355
  11,496
  12,717
  14,013
  15,385
  16,829
  18,346
  19,935
  21,593
  23,323
  25,124
  26,997
  28,943
  30,966
  33,065
  35,246
  37,511
  39,863
  42,307
  44,848
  47,489
  50,237
  53,097
Operating income, $m
  3,040
  4,419
  6,015
  7,835
  9,883
  12,159
  14,661
  17,386
  20,330
  23,488
  26,855
  30,425
  34,194
  38,160
  42,319
  46,669
  51,211
  55,947
  60,877
  66,007
  71,341
  76,887
  82,650
  88,642
  94,872
  101,350
  108,091
  115,106
  122,411
  130,021
EBITDA, $m
  20,531
  26,341
  33,047
  40,673
  49,231
  58,726
  69,149
  80,488
  92,726
  105,843
  119,817
  134,628
  150,259
  166,695
  183,926
  201,946
  220,755
  240,357
  260,764
  281,991
  304,058
  326,994
  350,830
  375,602
  401,353
  428,128
  455,979
  484,961
  515,133
  546,560
Interest expense (income), $m
  429
  6,699
  7,531
  9,192
  11,107
  13,283
  15,723
  18,429
  21,398
  24,627
  28,111
  31,844
  35,820
  40,033
  44,479
  49,154
  54,054
  59,177
  64,525
  70,098
  75,899
  81,932
  88,205
  94,723
  101,497
  108,537
  115,854
  123,462
  131,374
  139,608
  148,180
Earnings before tax, $m
  -3,659
  -3,112
  -3,177
  -3,272
  -3,400
  -3,564
  -3,768
  -4,012
  -4,297
  -4,623
  -4,989
  -5,395
  -5,839
  -6,319
  -6,835
  -7,384
  -7,966
  -8,578
  -9,221
  -9,892
  -10,591
  -11,318
  -12,073
  -12,855
  -13,665
  -14,503
  -15,371
  -16,269
  -17,197
  -18,159
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -3,659
  -3,112
  -3,177
  -3,272
  -3,400
  -3,564
  -3,768
  -4,012
  -4,297
  -4,623
  -4,989
  -5,395
  -5,839
  -6,319
  -6,835
  -7,384
  -7,966
  -8,578
  -9,221
  -9,892
  -10,591
  -11,318
  -12,073
  -12,855
  -13,665
  -14,503
  -15,371
  -16,269
  -17,197
  -18,159

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  134,898
  169,081
  208,487
  253,260
  303,476
  359,149
  420,243
  486,681
  558,362
  635,169
  716,979
  803,677
  895,159
  991,341
  1,092,162
  1,197,590
  1,307,622
  1,422,288
  1,541,648
  1,665,796
  1,794,856
  1,928,983
  2,068,363
  2,213,211
  2,363,770
  2,520,309
  2,683,127
  2,852,544
  3,028,910
  3,212,598
Adjusted assets (=assets-cash), $m
  134,898
  169,081
  208,487
  253,260
  303,476
  359,149
  420,243
  486,681
  558,362
  635,169
  716,979
  803,677
  895,159
  991,341
  1,092,162
  1,197,590
  1,307,622
  1,422,288
  1,541,648
  1,665,796
  1,794,856
  1,928,983
  2,068,363
  2,213,211
  2,363,770
  2,520,309
  2,683,127
  2,852,544
  3,028,910
  3,212,598
Revenue / Adjusted assets
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
  0.057
Average production assets, $m
  174,906
  219,227
  270,320
  328,372
  393,481
  465,666
  544,878
  631,020
  723,961
  823,547
  929,620
  1,042,031
  1,160,645
  1,285,352
  1,416,074
  1,552,769
  1,695,435
  1,844,109
  1,998,869
  2,159,836
  2,327,172
  2,501,079
  2,681,796
  2,869,603
  3,064,814
  3,267,780
  3,478,885
  3,698,549
  3,927,221
  4,165,387
Working capital, $m
  -152,761
  -191,470
  -236,095
  -286,797
  -343,662
  -406,708
  -475,891
  -551,127
  -632,300
  -719,277
  -811,921
  -910,100
  -1,013,695
  -1,122,613
  -1,236,785
  -1,356,173
  -1,480,776
  -1,610,626
  -1,745,792
  -1,886,379
  -2,032,529
  -2,184,417
  -2,342,254
  -2,506,283
  -2,676,778
  -2,854,046
  -3,038,423
  -3,230,275
  -3,429,995
  -3,638,007
Total debt, $m
  139,455
  170,220
  205,685
  245,981
  291,176
  341,281
  396,265
  456,060
  520,573
  589,699
  663,329
  741,357
  823,690
  910,254
  1,000,992
  1,095,878
  1,194,907
  1,298,106
  1,405,530
  1,517,263
  1,633,417
  1,754,132
  1,879,574
  2,009,937
  2,145,440
  2,286,325
  2,432,861
  2,585,337
  2,744,066
  2,909,385
Total liabilities, $m
  121,408
  152,173
  187,638
  227,934
  273,129
  323,234
  378,218
  438,013
  502,526
  571,652
  645,282
  723,310
  805,643
  892,207
  982,945
  1,077,831
  1,176,860
  1,280,059
  1,387,483
  1,499,216
  1,615,370
  1,736,085
  1,861,527
  1,991,890
  2,127,393
  2,268,278
  2,414,814
  2,567,290
  2,726,019
  2,891,338
Total equity, $m
  13,490
  16,908
  20,849
  25,326
  30,348
  35,915
  42,024
  48,668
  55,836
  63,517
  71,698
  80,368
  89,516
  99,134
  109,216
  119,759
  130,762
  142,229
  154,165
  166,580
  179,486
  192,898
  206,836
  221,321
  236,377
  252,031
  268,313
  285,254
  302,891
  321,260
Total liabilities and equity, $m
  134,898
  169,081
  208,487
  253,260
  303,477
  359,149
  420,242
  486,681
  558,362
  635,169
  716,980
  803,678
  895,159
  991,341
  1,092,161
  1,197,590
  1,307,622
  1,422,288
  1,541,648
  1,665,796
  1,794,856
  1,928,983
  2,068,363
  2,213,211
  2,363,770
  2,520,309
  2,683,127
  2,852,544
  3,028,910
  3,212,598
Debt-to-equity ratio
  10.340
  10.070
  9.870
  9.710
  9.590
  9.500
  9.430
  9.370
  9.320
  9.280
  9.250
  9.220
  9.200
  9.180
  9.170
  9.150
  9.140
  9.130
  9.120
  9.110
  9.100
  9.090
  9.090
  9.080
  9.080
  9.070
  9.070
  9.060
  9.060
  9.060
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3,659
  -3,112
  -3,177
  -3,272
  -3,400
  -3,564
  -3,768
  -4,012
  -4,297
  -4,623
  -4,989
  -5,395
  -5,839
  -6,319
  -6,835
  -7,384
  -7,966
  -8,578
  -9,221
  -9,892
  -10,591
  -11,318
  -12,073
  -12,855
  -13,665
  -14,503
  -15,371
  -16,269
  -17,197
  -18,159
Depreciation, amort., depletion, $m
  17,491
  21,923
  27,032
  32,837
  39,348
  46,567
  54,488
  63,102
  72,396
  82,355
  92,962
  104,203
  116,064
  128,535
  141,607
  155,277
  169,544
  184,411
  199,887
  215,984
  232,717
  250,108
  268,180
  286,960
  306,481
  326,778
  347,889
  369,855
  392,722
  416,539
Funds from operations, $m
  13,832
  18,811
  23,855
  29,566
  35,948
  43,002
  50,720
  59,090
  68,099
  77,732
  87,973
  98,808
  110,226
  122,216
  134,772
  147,893
  161,578
  175,832
  190,666
  206,092
  222,126
  238,790
  256,107
  274,105
  292,816
  312,275
  332,517
  353,586
  375,525
  398,380
Change in working capital, $m
  -33,042
  -38,710
  -44,624
  -50,702
  -56,866
  -63,045
  -69,183
  -75,236
  -81,173
  -86,977
  -92,644
  -98,178
  -103,596
  -108,918
  -114,171
  -119,389
  -124,603
  -129,850
  -135,166
  -140,587
  -146,150
  -151,888
  -157,837
  -164,029
  -170,495
  -177,268
  -184,377
  -191,852
  -199,720
  -208,012
Cash from operations, $m
  46,874
  57,520
  68,479
  80,268
  92,814
  106,047
  119,903
  134,326
  149,272
  164,709
  180,617
  196,987
  213,821
  231,133
  248,944
  267,281
  286,180
  305,682
  325,832
  346,679
  368,276
  390,678
  413,944
  438,134
  463,312
  489,543
  516,895
  545,438
  575,245
  606,392
Maintenance CAPEX, $m
  -13,708
  -17,491
  -21,923
  -27,032
  -32,837
  -39,348
  -46,567
  -54,488
  -63,102
  -72,396
  -82,355
  -92,962
  -104,203
  -116,064
  -128,535
  -141,607
  -155,277
  -169,544
  -184,411
  -199,887
  -215,984
  -232,717
  -250,108
  -268,180
  -286,960
  -306,481
  -326,778
  -347,889
  -369,855
  -392,722
New CAPEX, $m
  -37,830
  -44,321
  -51,093
  -58,052
  -65,109
  -72,184
  -79,212
  -86,143
  -92,940
  -99,586
  -106,074
  -112,411
  -118,613
  -124,707
  -130,722
  -136,696
  -142,666
  -148,673
  -154,760
  -160,967
  -167,336
  -173,907
  -180,718
  -187,807
  -195,211
  -202,966
  -211,105
  -219,663
  -228,673
  -238,166
Cash from investing activities, $m
  -51,538
  -61,812
  -73,016
  -85,084
  -97,946
  -111,532
  -125,779
  -140,631
  -156,042
  -171,982
  -188,429
  -205,373
  -222,816
  -240,771
  -259,257
  -278,303
  -297,943
  -318,217
  -339,171
  -360,854
  -383,320
  -406,624
  -430,826
  -455,987
  -482,171
  -509,447
  -537,883
  -567,552
  -598,528
  -630,888
Free cash flow, $m
  -4,664
  -4,291
  -4,537
  -4,816
  -5,132
  -5,485
  -5,876
  -6,304
  -6,770
  -7,273
  -7,812
  -8,386
  -8,995
  -9,638
  -10,314
  -11,022
  -11,762
  -12,535
  -13,339
  -14,175
  -15,044
  -15,946
  -16,882
  -17,852
  -18,860
  -19,904
  -20,989
  -22,114
  -23,282
  -24,496
Issuance/(repayment) of debt, $m
  15,394
  30,765
  35,465
  40,296
  45,194
  50,106
  54,984
  59,794
  64,513
  69,126
  73,630
  78,028
  82,334
  86,563
  90,739
  94,885
  99,029
  103,199
  107,424
  111,733
  116,154
  120,715
  125,442
  130,363
  135,503
  140,886
  146,535
  152,476
  158,730
  165,319
Issuance/(repurchase) of shares, $m
  17,928
  6,530
  7,118
  7,749
  8,421
  9,132
  9,877
  10,656
  11,465
  12,304
  13,170
  14,065
  14,987
  15,938
  16,917
  17,927
  18,969
  20,045
  21,157
  22,306
  23,497
  24,731
  26,011
  27,340
  28,721
  30,157
  31,653
  33,210
  34,834
  36,527
Cash from financing (excl. dividends), $m  
  33,322
  37,295
  42,583
  48,045
  53,615
  59,238
  64,861
  70,450
  75,978
  81,430
  86,800
  92,093
  97,321
  102,501
  107,656
  112,812
  117,998
  123,244
  128,581
  134,039
  139,651
  145,446
  151,453
  157,703
  164,224
  171,043
  178,188
  185,686
  193,564
  201,846
Total cash flow (excl. dividends), $m
  28,658
  33,004
  38,046
  43,229
  48,484
  53,752
  58,986
  64,146
  69,208
  74,157
  78,988
  83,707
  88,326
  92,863
  97,342
  101,790
  106,236
  110,710
  115,242
  119,864
  124,607
  129,500
  134,571
  139,850
  145,364
  151,139
  157,200
  163,572
  170,281
  177,350
Retained Cash Flow (-), $m
  -17,928
  -6,530
  -7,118
  -7,749
  -8,421
  -9,132
  -9,877
  -10,656
  -11,465
  -12,304
  -13,170
  -14,065
  -14,987
  -15,938
  -16,917
  -17,927
  -18,969
  -20,045
  -21,157
  -22,306
  -23,497
  -24,731
  -26,011
  -27,340
  -28,721
  -30,157
  -31,653
  -33,210
  -34,834
  -36,527
Prev. year cash balance distribution, $m
  779
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  102
  131
  164
  202
  245
  294
  348
  407
  472
  541
  615
  695
  779
  867
  961
  1,058
  1,160
  1,267
  1,378
  1,494
  1,614
  1,739
  1,869
  2,004
  2,145
  2,290
  2,442
  2,600
  2,764
  2,935
Cash available for distribution, $m
  11,509
  26,473
  30,929
  35,480
  40,062
  44,620
  49,108
  53,490
  57,743
  61,853
  65,818
  69,642
  73,339
  76,925
  80,425
  83,863
  87,267
  90,665
  94,086
  97,558
  101,110
  104,769
  108,561
  112,511
  116,643
  120,981
  125,547
  130,362
  135,447
  140,823
Discount rate, %
  15.40
  16.17
  16.98
  17.83
  18.72
  19.65
  20.64
  21.67
  22.75
  23.89
  25.08
  26.34
  27.66
  29.04
  30.49
  32.02
  33.62
  35.30
  37.06
  38.92
  40.86
  42.90
  45.05
  47.30
  49.67
  52.15
  54.76
  57.50
  60.37
  63.39
PV of cash for distribution, $m
  9,973
  19,617
  19,322
  18,408
  16,988
  15,204
  13,206
  11,138
  9,125
  7,261
  5,612
  4,211
  3,068
  2,168
  1,485
  985
  633
  393
  236
  136
  76
  41
  21
  10
  5
  2
  1
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  33.7
  23.7
  17.3
  13.0
  10.0
  7.8
  6.2
  5.0
  4.1
  3.4
  2.9
  2.4
  2.0
  1.8
  1.5
  1.3
  1.1
  1.0
  0.9
  0.8
  0.7
  0.6
  0.5
  0.5
  0.4
  0.4
  0.3
  0.3
  0.3

KeyCorp is a bank holding company. The Company is a bank-based financial services company. The Company operates through its subsidiary, KeyBank National Association (KeyBank), which is engaged in providing banking services. Through KeyBank and other subsidiaries, it provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, and investment banking products and services to individual, corporate and institutional clients. Its segments include Key Community Bank and Key Corporate Bank. Key Community Bank serves individuals and small to mid-sized businesses by offering a range of deposit, investment, lending, credit card, and personalized wealth management products and business advisory services. Key Corporate Bank is a full-service corporate and investment bank focused on serving the needs of middle market clients in industry sectors, which include consumer, energy, healthcare, industrial, public sector, real estate and technology.

FINANCIAL RATIOS  of  KeyCorp (KEY)

Valuation Ratios
P/E Ratio 29.5
Price to Sales 0
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow 15.1
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 93.3%
Cap. Spend. - 3 Yr. Gr. Rate 7.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 96.4%
Total Debt to Equity 96.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 3.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 7.8%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 18.5%
Eff/ Tax Rate - 3 Yr. Avg. 23%
Payout Ratio 42.4%

KEY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEY stock intrinsic value calculation we used $6026 million for the last fiscal year's total revenue generated by KeyCorp. The default revenue input number comes from 2017 income statement of KeyCorp. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KEY stock valuation model: a) initial revenue growth rate of 27.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 15.4%, whose default value for KEY is calculated based on our internal credit rating of KeyCorp, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of KeyCorp.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KEY stock the variable cost ratio is equal to 26.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2570 million in the base year in the intrinsic value calculation for KEY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for KeyCorp.

Corporate tax rate of 27% is the nominal tax rate for KeyCorp. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KEY stock is equal to 1.7%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KEY are equal to 2274.7%.

Life of production assets of 10 years is the average useful life of capital assets used in KeyCorp operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KEY is equal to -1986.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $0 million for KeyCorp - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1072 million for KeyCorp is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of KeyCorp at the current share price and the inputted number of shares is $23.1 billion.

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COMPANY NEWS

▶ How women broke into Seattle banking   [Jul-27-18 02:02PM  American City Business Journals]
▶ KeyCorp meets $450M First Niagara cost-cutting target   [02:39PM  American City Business Journals]
▶ Day Ahead: Top 3 Things to Watch   [Jul-18-18 07:44PM  Investing.com]
▶ 5 Major Bank Stocks Set to Outpace Earnings Estimates in Q2   [Jul-17-18 03:00PM  InvestorPlace]
▶ M&T, KeyBank file 'living wills' with regulators   [06:03AM  American City Business Journals]
▶ Delta, Occidental, KeyCorp Hike Dividends   [Jul-12-18 05:32PM  Barrons.com]
▶ Credit union takes ownership of vacant First Niagara branch   [02:25PM  American City Business Journals]
▶ KeyCorp To Host An Investor Meeting In New York City   [Jul-10-18 08:00AM  PR Newswire]
▶ These are the promising bank stocks: Strategists   [Jul-02-18 04:24PM  CNBC Videos]
▶ USI Insurance lands office space in Larkinville   [Jun-27-18 01:33PM  American City Business Journals]
▶ KeyCorp Reports 2018 Company-Run Stress Test Results   [Jun-21-18 04:59PM  PR Newswire]
▶ KeyCorp Raises Its Prime Lending Rate To 5.00 Percent   [Jun-13-18 04:05PM  PR Newswire]
▶ Tompkins Bank of Castile considered dozens of sites in search for local branch   [May-31-18 08:52AM  American City Business Journals]
▶ These are Ohio's 30 top paying companies (Countdown)   [May-30-18 04:01PM  American City Business Journals]
▶ Oil prices fall sharply, pulling energy companies with them   [May-25-18 03:05PM  Associated Press]
▶ KeyBank makes management changes   [May-22-18 12:23PM  American City Business Journals]
▶ Small business lending reaches record levels in Washington state   [May-14-18 07:41PM  American City Business Journals]
▶ 800 is the key mark for Buffalo SBA office   [12:12AM  American City Business Journals]
▶ KeyCorp Holds 2018 Annual Meeting   [09:37AM  PR Newswire]
▶ Survey: Small businesses feeling good about finances   [02:16PM  American City Business Journals]
▶ Boasting Buffalo: Sharon Lochocki, bank teller to retail leader   [May-04-18 09:00AM  American City Business Journals]
▶ 3 Bargain Stocks With Fast-Growing Dividends   [May-03-18 11:35AM  Investopedia]
▶ Santander gets good news on regulatory, customer service marks   [May-01-18 02:56PM  American City Business Journals]
▶ 3 Stocks for Whether Economy Grows or Slows: Barrons   [Apr-27-18 06:00AM  Investopedia]
▶ Banks saving millions under Trump tax breaks   [06:00AM  American City Business Journals]
▶ KeyBank donation to fund workforce development initiative   [Apr-24-18 03:06PM  American City Business Journals]
▶ Why KeyBank decided to sell its insurance business   [Apr-21-18 07:05AM  American City Business Journals]
▶ KeyBank CEO: Buffalo 'not a central point' of bank's latest cost-cutting plans   [Apr-19-18 12:11PM  American City Business Journals]
▶ What is Behind KeyCorps (NYSE:KEY) Superior ROE?   [Apr-11-18 04:47PM  Simply Wall St.]
▶ USI promises to grow Buffalo-area workforce as part of Key Insurance acquisition   [Apr-02-18 12:19PM  American City Business Journals]
▶ Bank Notes: The biggest financiers of the gun industry   [07:29AM  American City Business Journals]
▶ USI's acquisition of Key Insurance answers lingering question from First Niagara deal   [Mar-30-18 12:15PM  American City Business Journals]
▶ KeyCorp CEO pay adds up to $9M including incentives   [Mar-23-18 02:13PM  American City Business Journals]
▶ KeyCorp Raises Its Prime Lending Rate To 4.75 Percent   [Mar-21-18 03:48PM  PR Newswire]
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